The Securities and Exchange Commission announced charges and a preliminary injunction and asset freeze against Niket Shah, a New Jersey resident who stole more than $250,000 in a Ponzi scheme in which his friends and coworkers invested.
Based on investor complaints, the SEC moved quickly to investigate and charge Shah. According to the SEC's complaint, unsealed on March 22, 2018, in federal court in Brooklyn, New York, Shah used Spark Trading Group, LLC to defraud more than 15 investors into contributing hundreds of thousands of dollars to two funds that Shah marketed. Shah obtained investments for the funds by lying about his success as a trader, Spark Trading's returns, and how he intended to use investors' money, including altering financial statements to make the funds appear profitable when they were actually losing money. For instance the complaint alleges that Shah promised investors he would pay them monthly returns and guaranteed against losses. According to the complaint, Shah misused investor money for his own benefit and suffered substantial losses on the amounts actually invested. When investors sought their money back, he lied and said the money had been frozen by government agencies, including the Commission.
"Fraudsters who swindle their friends and colleagues using doctored financial statements and outright lies should expect the Commission and its staff to act swiftly and decisively, as we have here today," said Melissa Hodgman, Associate Director of the SEC's Enforcement Division.
The SEC's Complaint charges Spark Trading and Shah with violations of the antifraud provisions of the federal securities laws. The SEC is seeking return of allegedly ill-gotten gains with interest and civil money penalties.
A court hearing was held on March 23, 2018, on the SEC's complaint and requested relief at which the Honorable Brian M. Cogan granted the SEC's request for a preliminary injunction, asset freeze, order against the destruction of documents, and an accounting. The court had previously issued a March 12, 2018, temporary asset freeze against Spark Trading and Shah, and ordered them to provide an accounting of all money received from investors.
The SEC's investigation, which is continuing, has been conducted by W. Bradley Ney, D. Ashley Dolan, and J. Ashley Ebersole in the SEC's Washington, D.C. office and supervised by Melissa Robertson. The litigation will be led by Kenneth J. Guido, W. Bradley Ney, and J. Ashley Ebersole, under the supervision of Fred Block. The SEC would like to thank the Nadex Exchange for its substantial assistance in connection with this investigation.